BigAir – Home of the Happy Dance (BGL)

It’s not very stoic to celebrate when an event outside your control affects your life positively, but it does feel good to have your original reasoning validated by a response in the market.

Even though EBITDA for FY12 was slightly lower than I’d anticipated, BGL shot the lights out, recently paying a maiden 1c dividend, and acquiring Allegro Networks to broaden their Queensland coverage. BGL’s share price appreciation has also rewarded patient shareholders, from the 18c mark only 2 years ago to 55c today.

So what does this mean for the future of my holdings? The business is now somewhat more mature, although ironically more and more of the clients I deal with in my day job are buying BigAir links – generally to service areas in which copper connections aren’t fast enough to meet new demands for application delivery. Getting line of sight still presents a challenge but turning on a 10M/10M internet link, in a week’s notice, for very little install cost is impossible for any other technology to approach.

Interestingly while I’m now out of the telco business there has been more and more in the press about congestion in 3G/4G networks as consumer demand swamps infrastructure which the 2 major carriers are expanding as fast as they can get approvals for. I’m anticipating 4G demand to outstrip available spectrum in the next 12 months, which will hopefully convince Stephen Conroy to do something actually useful for telecommunications in Australia and shut down the 700MHz analogue TV networks and re-purpose the spectrum for 4G.

Another trend I’m seeing is my clients are rolling out more and more wi-fi network for their customers to use, particularly for things like big event days where mobile networks struggle under the load. First Aid crews need to carry two-way radios because mobile phones are unreliable in these situations. NBN to every home isn’t going to solve this problem, and I think anybody would be hard-pressed to dream up a more disastrous project than NBN, complete with farcical business case, incorrectly prioritised network design (straight to access network – why not build the core/transmission network first and let the private sector build wireless access POPs and more DSLAMs), and to crown it all; a deal to buy, and then shut down, the Optus HFC network to “increase uptake” (ie reduce competition) of NBN. Smash the machines! Create jobs!

What this all means is the BigAir are serving 2 niche markets at a scale against which it is not practical to compete. Their national Wimax network is enterprise-grade, and while their accommodation facility offerings have a lower barrier to entry, most of BigAir’s competition are organisations of the “two bit” variety. I’m anticipating further growth in the business and have no plans to sell my shares for at least the next 12 months.